Personal Finance

The Zig-Zag Pricing of Prescription Drugs

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The medication Irbesartan tends to be a low-cost solution for high blood pressure. But recently, the price skyrocketed — but only in the 150 milligram dose, and only (according to our quick review of prices) at Costco.

First, let’s repeat the mantra of every cost-conscious patient: in the healthcare marketplace, you should get used to asking what things cost. We have a number of tools at clearhealthcosts.com; there are also other transparency sources, like Dr. David Belk, who attacks health-care pricing anomalies over at truecostofhealthcare.org. Belk — an Alameda, Calif., physician – alerted me to the price changes in Irbesartan, one drug that shows how prices can change rapidly on a monthly basis.

The price for a 150 mg dose jumped recently, which Belk heard about when a patient e-mailed him saying the price was off the charts. But only for a particular dosage.

Our information comes from the Costco price list on the Costco website, Dec. 1, 2013, showing 150 mg of Irbesartan at $93.96 for 30 pills, and 300 mg of the same drug at $12.46 for 30 pills. That’s right: $93.96 for 150 mg, and $12.46 for 300 mg.

For reference, we also looked at a GoodRx price list, also from Dec. 1, when prices ranged from $14.07 to $75 for 30 days. CVS has a 30-day supply for $28.41.

Why Did the Price Jump?

As Belk explains it, price jumps like this one can happen as a result of the pharmacy following a doctor’s orders, and also the pricing policies of suppliers:

“When a doctor writes a prescription, the pharmacy is obligated to fill the specific drug and dose the doctor prescribes. The only substitution they’re allowed to make is generic for brand name. Also, once a drug goes generic, it’s much easier to prescribe because we don’t need to have it authorized. Another factor in this is the fact that pharmacies don’t ask for price quotes before buying medications. They just assume a medication will be about the same price as it was the last time they purchased it.”

This assumption means a price increase gets passed on to patients, Belk explains:

“Here’s what happens: The pharmaceutical company decides to raise the price of one of their formerly inexpensive medications to about 30 times the previous price. The pharmacy only finds out about this after they get the shipment of the medication so they get stuck with this huge bill. Doctors and patients are completely unaware that 75 & 300 mg Irbesartan (as well as any dose of Losartan, a similar drug) are many times cheaper than the 150 mg dose (you could take two 75 mg pills a day and save hundreds of dollars). When the doctor writes ‘Irbesartan (or Avapro) 150 mg’ that’s what gets filled and either the patient or the pharmacy gets stuck with the bill. The same thing happened with doxycycline last spring and glyburide a few years ago.”

In early October, he says, the 150 mg pill cost the same as the 75 mg dose. 

Who Pays When the Prices Skyrocket? 

While you might assume that price increases like this one will hit insurance companies and the insured similarly, you’d be wrong.

“As with most things in healthcare, the patient’s insurance is usually off the hook for this price hike because they have a prearranged deal with the pharmacy for how much, if anything, they’ll reimburse for a drug,” Belk added. “They have no reason to offer a penny more when the price of the drug skyrockets unexpectedly. The pharmaceutical company makes a huge profit on that one drug for a short time (usually several months) and no one outside of pharmacies and a few uninsured patients ever notice.

“My suspicion is that pharmacies aren’t complaining much yet because it still happens only occasionally and complaining about it would only bring more attention to the fact that these medications are extremely cheap. Remember, most chain pharmacies are still trying to maintain the illusion that you’re getting a deal when you have a $10 monthly copay for your generic medication. This is why it would be great to have the price of all medications posted all of the time. Imagine walking into a grocery store and seeing that the price of ground beef is $50 a pound. How quickly would you decide to have chicken instead of hamburgers tonight? Unfortunately, you can’t do that with prescription medications — yet.”

Pricing variations come for many reasons, including lack of competition, and the fact that the U.S. leaves pricing to the market – as opposed to other countries, which often regulate drug prices. Also, the price tag includes the actual price to produce, then a series of charges including the companies that manage pharmacy benefits; the group purchasing organizations; the warehouses where the medications are stored; the pharmacy that dispenses them; the costs of advertising the medication; the costs of marketing it (think drug reps at your doctor’s office); and on and on.

To compound the problem, there are actual drug shortages, which the Food and Drug Administration tracks.

Does It Happen to Other Drugs?

Steroid creams have seen the same price jumps, Belk says, as has levothyroxine, a thyroid drug — which had dropped to around $10 for 100 pills, and then jumped to $40 or $50.

“Now it’s back down to $14 for 100 pills,” he said.

Ambien, the sleeping pill, had routinely been about $10 for 100 pills in a 10 mg prescription at Costco, he said. Then it went up for about two weeks to nearly $400, he said. The 5 mg one stayed the same, he said.

“It’s only one size, one dose — it skyrockets, and you don’t know for how long,” he said.

The generic antibiotic doxycycline had its moment, too: it went from 5 cents a pill to $6 a pill, Belk said, adding, “That’s been generic so long there’s no longer a brand-name available.”

Glyburide, for diabetes, is another example that Belk says stayed pricey for two years. If you’re a doctor, you might know that other drugs do very similar things, Belk says, but if you’re a patient, you might not know that — either you take the drug and pay a premium, or you just don’t take it.

Costco’s policy company-wide is to sell at no more than 15% above what they pay, Belk said.

We reached out to Costco for comment, but have not received a response.

Costco is interesting because that’s its consistent pricing policy. Other pharmacies — both independents and chains — can charge whatever they want. We have consistently reported that prices vary widely on all sorts of medications — from $9 to $63 for the common birth-control pill Tri-Sprintec 28 in the New York area, for example.

What Can You Do?

  • Do your research. We have a prescription resources page with a wealth of information.
  • If you get handed a big bill when you go to the pharmacy, call your doctor, who can perhaps prescribe you something else that does exactly the same thing.
  • Keep track of your medications, and if your doctor can’t or won’t help out with the prices, ask the pharmacist if there’s a substitute. Often they can help you talk to your doctor.
  • Ask the pharmacy if it will match a competitor’s price. We have heard success stories with such an approach.
  • You might want to keep your insurance card in your pocket. Belk says many insurance plans starting in 2014, in California at least, have a co-pay for generic prescriptions of $19. Many generics can be bought for cash for considerably less than that.
  • Ask “how much is that?” Every time.

Image: iStock

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